Rising Health Care Costs Can Eat Up Your Retirement Savings

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The good news is that Americans are saving more for their golden years. But the task just got harder as a key retirement cost increased this year.

One in five American workers increased their retirement savings from last year, the highest level in five years, according to a new Bankrate.com survey. Only one in 20 haven’t saved at all this year or last year, a new low for the study.

“Both readings are indicative of an improving economy, where people are earning more and saving more," said Greg McBride, Bankrate.com’s chief financial analyst, in a statement.

Fidelity attributes this year’s hike is to rising drug costs and the increase in the use of medical services.

The estimate is based on a couple who has traditional Medicare insurance coverage and adds up the monthly expenses from Medicare premiums, co-payments and deductibles along with out-of-pocket costs for prescription medicine.

Additionally, Fidelity estimates that the same healthy couple would need $130,000 more to cover long-term care expenses, which is limited under Medicare coverage. That includes a policy with an $8,000 max monthly benefit and three years of benefits and adjusts 3 percent each year for inflation.

"Healthcare expenses can be difficult to project, especially when you are decades away from retirement," said Scott Thoma, principal and investment strategist for Edward Jones, in a statement. "Unexpected conditions and medical expenses that manifest later in life pose a great threat not only to physical and mental health, but also to the financial well-being of both the care receiver and the caregiver. That's why it is critical to start preparing early.”

Janna Herron is an award-winning senior editor for The Fiscal Times overseeing the Life + Leisure channel that covers financial issues that touch people and their families She holds a bachelor’s degree in English and Drama from Duke University. Follow her on Twitter.